Speaker A
This is one of the most important trading videos you will ever watch because you will see tested data that shows whether you will become a profitable trader or not. Over the years, I have tested many different trading strategies 100 times on the Trading Rush channel. I didn't just test them in one market, but in multiple market conditions from good to bad. In total, we tested more than 10,000 trades. That is a lot of trades. But I have also given all tested strategies a trading score and rated them in different categories such as win rate, ease of use, reliability, consistency of profits, and quality of trades. All this helps us find the best trading strategy out there. But when I plotted this tested data using charts, I found something really important and interesting. It showed the reality of trading and what actually decides if you will make it in trading or not. So in this video, we will go through seven really important data points that will greatly impact your probability of becoming a successful trader according to data. If you have been trading for a while, there is a good chance you have tried many strategies and there is an even better chance that most of them did not work. So you ditched them, found new ones, and the cycle kept going. In our trading journey, we experienced that the majority of trading strategies don't work. Some of them give around a break-even win rate and only a tiny percentage actually make money. But here is what the data from over 10,000 trades actually shows. And it is going to change everything you knew about why strategies work. You see, on the Trading Rush channel, I tested strategies in mostly good, extremely good, and extremely bad market conditions. And almost all strategies were trend trading strategies. Here, the first chart shows what happened to strategies in the mostly good trending market. This is the market where the price is mostly trending with bigger pullbacks, but also has range choppiness in between. In this market condition, around 78% of strategies made a profit. Only 13% actually lost money and around 9% was sitting near the break-even point. This data proves something really important. Take any strategy you have ever used, the ones you deleted, the ones you gave up on, and the ones we all thought didn't work. If those strategies were trend trading strategies, there is a really high chance the strategy was working and making money all along. The strategy was never broken, but something else was the problem, which you will see in a moment. The second chart shows what happened to the strategies in extremely good market conditions. This is where the price was moving strongly in one direction and the range choppy markets were filtered out. Around 87% of strategies made a profit and only 12% lost money. This also includes strategies that didn't give enough trading opportunities. But even counting those as bad results, only 12% lost. Most of them made a really nice profit. But things get really interesting in the extremely bad market conditions. Around 75% of strategies lost money and 23% were around the break-even point. Only a single strategy out of everything managed to make a good profit. This is important to understand because it really shows what is actually happening. For example, imagine you are standing at a train station. When the train slows down and stops, some people get out of the train and some people get in. Then the train starts moving again, picks up speed, and before you know it, it is flying down the tracks. Now, at that point, it doesn't matter what is inside that train. Luggage, a bicycle, a confused tourist, or a broken umbrella. Everything inside is moving at full speed. Not because of any special ability, but simply because the train is carrying it forward. But now imagine that this station is the last stop on the route. The train slows down. Some people get out and some people get in. But this time, nothing happens. Everything and everyone who got on the train is now just sitting in a stationary train going absolutely nowhere. The 10,000 trades tested data is showing the same thing. A trending market is like a moving train. The price moves in one direction, then slows down a little at the train station where people get in and out, and then the price continues to move in the trend direction. Strategies work not because they are special, but because the trend is doing all the heavy lifting. When the price train comes to the last station and stops moving, becoming choppy, slow, ranging, or pretty much flat, most trend trading strategies in this market will simply lose money. They lose not because they don't work, but simply because the train itself has stopped moving. That is why the data shows most strategies winning in good trending markets and most strategies losing money in bad market conditions. But the thing is when we are beginner traders, we have no experience identifying the good and bad market conditions. Everything looks the same to us. Our trading experience looks something like the third chart where most trading strategies lose money and we think they simply don't work. This is also the point where many traders simply quit trading. But once we gain enough live trading experience to identify the good and bad markets, we learn to simply avoid trading when market conditions get bad. As a result, the profit graph starts moving in an upward direction overall. This is when we start finding strategies that actually work. But it was all an illusion. All these strategies always used to work. It just didn't work before because we lacked enough experience to filter out the bad market conditions. So, the data from more than 10,000 tested trades says that if you really want to become profitable in trading, don't focus on the strategies. Focus on identifying the good and bad market conditions first because those are the main things that greatly impact your probability of success. When we are beginner traders, we have a win rate number planted in our heads. We see a trading guru get a 60% or 70% win rate and that is what we think we should be getting. Trading gurus show us how they win eight out of 10 trades and make big profits. But even after following all the rules, we only manage to get a break-even or just above a break-even win rate. We think that we are just not good enough. The trading guru must have a secret strategy that makes him win eight out of 10 trades with a big reward risk ratio. So we keep switching our strategy and chasing that high win rate. But we still never manage to get win rates like those trading gurus. But if we look at the data, you will see the reality of trading gurus and how they actually trade. This chart shows the win rate data of 10,000 trades. On the x-axis, we see the win rate score a strategy has achieved and on the y-axis we see the number of strategies that achieved that particular win rate score. Basically, if you see a tall mountain near the left side of the chart, it means a lot of strategies got a really low win rate. But if you see a tall mountain on the right side, it means many strategies got a high win rate. The different colored mountains you are seeing represent different market conditions. The red one represents the extremely bad market win rate. The blue one represents the mostly good market win rate and the green mountain represents the extremely good market win rate. In my testing series, I used a 1.5 to 1 reward to risk ratio. The break-even win rate for this ratio is 40%, which is represented by a win rate score of four on this chart. Basically, this yellow line is the break-even point. All strategies below that point made a loss and all strategies on the right-hand side of that point made a profit. As you can see in the extremely bad market, not only did most strategies make a loss, but the median point, which is represented by this red line, is also below the yellow break-even point. But you can also see that some part of this red